BlackRock Reports Mixed Q4 Results, But Core Trends Are Strong, Says Bullish BofA

BlackRock, Inc. BLK reported fourth-quarter adjusted earnings per share of $6.08 Wednesday, missing the Street's estimate of $6.28.

Despite the miss — attributed largely to lower non-operating and higher seasonal and other expenses — the company exhibited strong core trends during the quarter and continues to be positioned for above-average growth, according to Bank of America Merrill Lynch.

The Analyst

Analyst Michael Carrier maintains a Buy rating on BlackRock with a price target lifted from $444 to $490.

The Thesis

BlackRock’s revenue declined more than expected and adjusted operating margins contracted to 44.2 percent. Adjusted expenses were marginally higher than expected. Total flows were above $50 billion, with long-term inflows increasing to $44 billion and money market flows turning positive. 

BlackRock’s revenue outlook seems to be improving, given rising markets, healthy inflows, a more stable fee rate and strong growth in tech revenues, Carrier said in a Wednesday note. 

The investment firm announced a $60-million restructuring to revamp its workforce, the analyst said. Adjusted expenses are expected to decline in Q1, and the company could benefit from modest operating leverage in 2019, with lower G&A and comp ratio over time, he said. 

“Lastly, we expect superior organic growth to continue given ETF strength, mostly favorable investment performance, global distribution, a strong illiquid pipeline, a focus on solutions and investments in technology." 

Price Action

BlackRock shares were down 0.64 percent at $410.65 at the time of publication Thursday. 

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